January 13, 2017

On
January 1st, 2017, the Canadian
province of Ontario’s cap and trade plan went into effect. Introduced by
current Provincial Premier Kathleen Wynne of the Ontario Liberal Party, the
plan links Ontario with Quebec and California’s cap and trade carbon market, in
place now for several years.

The plan puts a cap on the amount of carbon homes
and businesses can emit, and that cap lowers over time. Parties in the three
subnationals whose emissions are above and below the cap can buy and sell
carbon allowances each year in auctions, the first of which, for Ontario, will
be held this March.

The
plan’s launch comes at a challenging time for Premier Wynne. Her approval
ratings were measured at 14% in October 2016. The disapproval is in part
because the province is paying higher-than-average electricity prices, an issue
Wynne has accepted responsibility for. Many voters believe these costs are due
to Ontario’s push for more renewable energy use back in 2009 - and to a
certain extent they are right. Ontario’s auditor general found that Ontario
is paying a disproportionate amount for the 6.3% of the provincial grid
supplied by renewable energy generated in the province because the provincial
government offered overly generous contracts to the companies providing the energy.
The high cost of electricity is not, however, because the renewable energy
generation itself is outrageously expensive, as some unfortunately believe.

The
Wynne government implemented policies this month to lower electricity costs
through tax cuts and other measures, but at the same time, according to a
government-commissioned study, the province’s cap and trade plan will mean
increased heating and gas costs. And though the plan’s launch follows closely
on the heels of the federal Trudeau government’s October announcement of a
pan-Canadian cost on carbon to be implemented in 2018, it follows even more
closely the election of a climate denier to the office of President of the
United States, creating the impression among many that Ontario’s emissions
reductions will be offset by emissions increases south of the border.

As
Ontario Environment Minister Glen Murray noted,
however, climate action on the subnational level will only become more
important in the Trump era, and accordingly, various states, provinces and
cities are continuing undeterred with their own climate action plans – including
those south of the border. Ontario’s cap and trade plan will funnel its
collected revenue towards transitioning Ontario to a low-carbon economy through
investments in public transit, electric vehicles and housing retrofits.
Furthermore, the plan is intended to spur innovation and create jobs by
incentivizing companies to reduce emissions through new technologies and
efficiency practices. Most importantly though, it puts a price on a social
harm, meaning Ontarians who pollute less are not subsidizing those who pollute
more by means of the health and wellness costs associated with harmful climate
change.